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20 May 2008

Follow-up on Warren Buffett and Efficient Market Theory

My recent post on Warren Buffett generated some very interesting comments that qualified and corrected my initial remarks. One reader sent in along the following analysis, which he agreed to let me post:

Here are some data that you can use to compare Buffett’s returns to the private
equity universe. These data come from S-1s filed by these two private equity
groups in connection with their IPOs. As I mentioned in my post, given
Buffett’s recent investing style – (i) he buys entire companies rather than
passive minority stakes, (ii) he buys in negotiated transactions rather than
at-the-market and (iii) he uses substantial leverage from the float on his
reinsurance business – he looks more like KKR than Fidelity. How do his returns
compare to the returns from these two private equity players?